Fraud Prevention and Detection Best Practices

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Fraud Prevention and Detection Best Practices

The fraud wave was rising since the COVID-19 pandemic started. People started buying online much more and fraudsters took advantage of weak fraud detection measures at online stores. In 2022, with the Russian invasion of Ukraine and consequent sanctions, the risk of fraud grew tenfold. Corrupt Russian officials seek ways to launder their ill-gained fortunes, businesses want to evade sanctions and individuals try to buy at least anything before their funds completely turn into a pile of paper.

Unfortunately for businesses in the civilized world, this means they can potentially become accomplices to crimes against humanity, money laundering, or financing of terrorism. The situation is even more daring, as governments and regulators worldwide issue and enact orders and laws prohibiting businesses to work with bloody Russian money. 

This means the need for reliable fraud detection and prevention is bigger than ever. Here is how Covery can help you deal with this challenge, keep fraud at bay, reduce the number of chargebacks and save your time, nerves, and resources.

What are the methods of fraud prevention and detection?

By definition, fraud is a malevolent activity aimed at cheating other people financially. Merchants can defraud their customers and each other, customers can defraud merchants and other customers — there are many types of fraud. The most widespread types of online fraud are Card Not Present fraud, affiliate fraud, account takeover, and friendly fraud, which we described in detail in other articles.

What is important is that all such activities have certain things in common. Fraudsters try to forge identities, use synthetic personas — combinations of stolen credit card details and fake account details, and perform actions that fall into a certain pattern. For example, during the account takeover, fraudsters commonly log into the account and proceed to change the email associated with the account and reset the password to block out the rightful owners from restoring access to their digital profile.

Knowing such patterns and monitoring for their first signs enables fraud detection in real-time. This is the first step to an efficient fraud prevention strategy. This is how Covery does it.

Covery deploys several proprietary industry-grade technologies — automated KYC/AML checks, Trustchain reputation database, device fingerprinting, device screening, behavioral analysis, supervised Machine Learning algorithm — to enable fraud detection and prevention on the go. We will describe them in more detail below.

What is fraud detection and prevention in banking?

Banking is a heavily regulated industry that has to ensure diligent customer checks and transaction monitoring to guarantee reliable levels of risk mitigation and fraud prevention. Whenever a new customer creates an account, a bank must perform a KYC/AML check — whether any of the credentials and details used are associated with sanctioned entities, PEPs (politically exposed persons), and other possible undesirable clients. 

Covery does this using the latest versions of Dow Jones databases, so you have a decision in under 300 ms and can detect possible fraudsters as early as the registration stage. These checks are also performed at every login to ensure continuous AML screening.

In addition, whenever a customer logs in, Covery performs an automated device screening which allows identifying the device and the user quite accurately. The sum of all data points collected over several logins forms a device fingerprint. This ensures that you can accurately identify users even despite any adjustments (a trip from Texas to Wyoming, purchase of a new device, switching to another Internet service provider or mobile carrier, etc.)

This also provides ground for behavioral analysis. For example, if a customer logs in from the same IP address quite regularly, you can omit OTP checks every time to provide a more smooth customer journey. But should an IP change or any other discrepancies occur — you can check their identity once more, by requesting a PIN code, sending an OTP message, or making a personal call.

However, even the most trustworthy customer can receive payments from terrorist accounts or can suffer an account takeover. You should monitor for suspicious transactions or activity and this is where Trustchain steps in. It consumes data regarding 12 personal identifiers of every visitor — email name and domain, IP address and geolocation data, IBAN or BIC numbers, and much more. It then compares this data with reputation records gathered by all other Covery users. This way, if any of your user or transaction details match known fraudsters, you are alerted immediately and can decline such transactions to avoid wasting resources on payment processing and chargeback management.

How do you detect fraud?

The same works for other industries, not only for banking. Covery serves customers across 23 industries — from fintech and e-Commerce to dating, gambling, and microfinance. We ensure reliable fraud detection and prevention via a combination of automated KYC, in-depth device fingerprinting, detailed behavioral analysis, and continuous Trustchain reputation checks.

What is a fraud prevention system?

The best way to protect your business from fraud is to detect fraudsters as soon as possible and decline any transactions with them. However, there are many situations where legitimate customers can appear to be potentially risky. For example, let’s imagine a user who logged in from Canada at the same time each week and ordered approximately the same amounts of household goods and groceries.

Then, all of a sudden he logs in from Paris and orders jewelry for quite a significant amount, and wants it delivered to an address in Italy. This might look like the account has been hacked — but a confirmation call can explain that a customer is on a trip to Europe and wants a surprise present to be delivered to his daughter for her birthday.

There always are risk factors that influence every transaction and each case must be analyzed separately. To ensure efficient fraud prevention, Covery, an anti-fraud system, provides a flexible risk logic rule engine with 15 pre-configured scenarios and the ability to create thousands of business rules uniquely tailored for your business. 

As a result, you can get a risk score from -100 (secure) to +100 (fraud) and prepare automated scenarios for each range of values. In the example above, which would have yielded about +50 risk score points, you might invoke an additional 3D Secure check. A legitimate user will have no trouble passing it, while a fraudster will not be able to deceive you. This and other anti-fraud tools will guarantee reliable fraud detection and prevention.


Every business can benefit from a comprehensive fraud detection and prevention system like Covery. We can analyze your historical data, train our Supervised Machine Learning algorithms, uncover fraudulent actions and effectively put a stop to them. Many customers in the USA, Europe, and booking companies from Spain reported up to an 80% reduced number of fraud cases.

Covery can actually deliver much more value to your business. Wanna know how? Order a free demo and discover all our fraud detection and prevention capabilities!